TodayisWednesday,March09,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
SECONDDIVISION

G.R.No.133876December29,1999
BANKOFAMERICA,NTandSA,petitioner,
vs.
AMERICANREALTYCORPORATIONandCOURTOFAPPEALS,respondents.

BUENA,J.:
Does a mortgagecreditor waive its remedy to foreclose the real estate mortgage constituted over a third party
mortgagor's property situated in the Philippines by filing an action for the collection of the principal loan before
foreigncourts?
Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the Rules of Court are the
decision 1 of public respondent Court of Appeals in CA G.R. CV No. 51094, promulgated on 30 September 1997 and its
resolution,2dated22May1998,denyingpetitioner'smotionforreconsideration.

PetitionerBankofAmericaNT&SA(BANTSA)isaninternationalbankingandfinancinginstitutiondulylicensedto
do business in the Philippines, organized and existing under and by virtue of the laws of the State of California,
UnitedStatesofAmericawhileprivaterespondentAmericanRealtyCorporation(ARC)isadomesticcorporation.
BankofAmericaInternationalLimited(BAIL),ontheotherhand,isalimitedliabilitycompanyorganizedandexisting
underthelawsofEngland.
Asbornebytherecords,BANTSAandBAILonseveraloccasionsgrantedthreemajormultimillionUnitedStates
(US) Dollar loans to the following corporate borrowers: (1) Liberian Transport Navigation, S.A. (2) El Challenger
S.A. and (3) Eshley Compania Naviera S.A. (hereinafter collectively referred to as "borrowers"), all of which are
existingunderandbyvirtueofthelawsoftheRepublicofPanamaandareforeignaffiliatesofprivate
respondent.3
Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed and
enteredintorestructuringagreements.Asadditionalsecurityfortherestructuredloans,privaterespondentARCas
thirdpartymortgagorexecutedtworealestatemortgages, 4dated17February1983and20July1984,overitsparcels
oflandincludingimprovementsthereon,locatedatBarrioSto.Cristo,SanJoseDelMonte,Bulacan,andwhicharecovered
byTransferCertificateofTitleNos.T78759,T78760,T78761,T78762andT78763.

Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting petitioner
BANTSAtofilecivilactions5beforeforeigncourtsforthecollectionoftheprincipalloan,towit:
a) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court
(1992Folio No 2098) against Liberian Transport Navigation S.A., Eshley Compania
Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation
Corp.,S.A.,EduardoKatipunanLitonjuaandAurelioKatipunanLitonjuaonJune17,1992.
b) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court
(1992Folio No. 2245) against El Challenger S.A., Espriona Shipping Company S.A.,
EduardoKatipuanLitonjua&AurelioKatipunanLitonjuaonJuly2,1992
c)InHongkong,intheSupremeCourtofHongkongHighCourt(ActionNo.4039of1992)
againstEshleyCompaniaNavieraS.A.,ElChallengerS.A.,EsprionaShippingCompany

S.A. Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua

Chartering (Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo Katipunan
LitonjuaonNovember19,1992and
d)InHongkong,intheSupremeCourtofHongkongHighCourt(ActionNo.4040of1992)
againstEshleyCompaniaNavieraS.A.,ElChallengerS.A.,EsprionaShippingCompany,
S.A., Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua
Chartering(Edyship)Co.,Jr.andEduardoKatipunanLitonjuaonNovember21,1992.
In the civil suits instituted before the foreign courts, private respondent ARC, being a third party mortgagor, was
privatenotimpleadedaspartydefendant.
On16December1992,petitionerBANTSAfiledbeforetheOfficeoftheProvincialSheriffofBulacan,Philippinesan
applicationforextrajudicialforeclosure6ofrealestatemortgage.
On22January1993,afterduepublicationandnotice,themortgagedrealpropertiesweresoldatpublicauctionin
anextrajudicialforeclosuresale,withIntegratedCreditandCorporationServicesCo(ICCS)asthehighestbidder
forthesumofTwentyfourMillionPesos(P24,000.000.00).7
On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an action for
damages 8 against the petitioner, for the latter's act of foreclosing extrajudicially the real estate mortgages despite the
pendencyofcivilsuitsbeforeforeigncourtsforthecollectionoftheprincipalloan.

Initsanswer9petitionerallegedthattheruleprohibitingthemortgageefromforeclosingthemortgageafteranordinarysuit
forcollectionhasbeenfiled,isnotapplicableinthepresentcase,claimingthat:

a) The plaintiff, being a mere third party mortgagor and not a party to the principal restructuring
agreements,wasnevermadeapartydefendantinthecivilcasesfiledinHongkongandEngland
b) There is actually no civil suit for sum of money filed in the Philippines since the civil actions were
filed in Hongkong and England. As such, any decisions (sic) which may be rendered in the
abovementionedcourtsarenot(sic)enforceableinthePhilippinesunlessaseparateactiontoenforce
the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50 of the Revised
RulesofCourt.
c)UnderEnglishLaw,whichisthegoverninglawundertheprincipalagreements,themortgageedoes
notloseitssecurityinterestbyfilingcivilactionsforsumsofmoney.
On14December1993,privaterespondentfiledamotionfor
suspension10oftheredemptionperiodonthegroundthat"itcannotexercisesaidrightofredemptionwithoutatthesame
time waiving or contradicting its contentions in the case that the foreclosure of the mortgage on its properties is legally
improperandthereforeinvalid."

Inanorder 11dated28January1994,thetrialcourtgrantedtheprivaterespondent'smotionforsuspensionafterwhicha
copyofsaidorderwasdulyreceivedbytheRegisterofDeedsofMeycauayan,Bulacan.

On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale, consolidated its
ownershipovertherealproperties,resultingtotheissuanceofTransferCertificateofTitleNos.T18627,T186272,
T186273,T16471andT16472initsname.
On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties to Stateland
Investment Corporation for the amount of Thirty Nine Million Pesos (P39,000,000.00). 12 Accordingly, Transfer
CertificateofTitleNos.T187781(m),T187782(m),T187783(m),T16653P(m)andT16652P(m)wereissuedinthelatter's
name.

Aftertrial,thelowercourtrenderedadecision 13 in favor of private respondent ARC dated 12 May 1993, the decretal
portionofwhichreads:

WHEREFORE,judgmentisherebyrendereddeclaringthatthefilinginforeigncourtsbythedefendant
ofcollectionsuitsagainsttheprincipaldebtorsoperatedasawaiverofthesecurityofthemortgages.
Consequently,theplaintiff'srightsasownerandpossessorofthepropertiesthencoveredbyTransfer
Certificates of Title Nos. T78759, T78762, T78763, T78760 and T78761, all of the Register of
Deeds of Meycauayan, Bulacan, Philippines, were violated when the defendant caused the
extrajudicialforeclosureofthemortgagesconstitutedthereon.
Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with legal
interestthereonfromthedateofthefilingofthecomplaintuptothedateofactualpayment:

1)ActualorcompensatorydamagesintheamountofNinetyNineMillionPesos(P99,000,000.00)
2)ExemplarydamagesintheamountofFiveMillionPesos(P5,000,000.00)and
3)Costsofsuit.
SOORDERED.
On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner to file a
motionforreconsiderationwhichtheappellatecourtdenied.
Hence,theinstantpetitionforreview14oncertiorariwherehereinpetitionerBANTSAascribestotheCourtofAppealsthe
followingassignmentoferrors:

1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon.
Supreme Court in the cases of Caltex Philippines, Inc. vs. Intermediate Appellate Court
docketedasG.R.No.74730promulgatedonAugust25,1989andPhilippineCommercial
International Bank vs. IAC, 196 SCRA 29 (1991 case), although said cases were duly
cited, extensively discussed and specifically mentioned, as one of the issues in the
assignmentoferrorsfoundonpage5ofthedecisiondatedSeptember30,1997.
2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the
private respondent actual and exemplary damages totalling P171,600,000.00, as of July
12,1998althoughsuchhugeamountwasnotaskednorprayedforinprivaterespondent's
complaint,iscontrarytolawandistotallyunsupportedbyevidence(sic).
Infine,thisCourtiscalledupontoresolvetwomainissues:
1.Whetherornotthepetitioner'sactoffilingacollectionsuitagainsttheprincipaldebtors
for the recovery of the loan before foreign courts constituted a waiver of the remedy of
foreclosure.
2.Whetherornottheawardbythelowercourtofactualandexemplarydamagesinfavor
ofprivaterespondentARC,asthirdpartymortgagor,isproper.
Thepetitionisbereftofmerit.
First,astotheissueofavailabilityofremedies,petitionersubmitsthatawaiveroftheremedyofforeclosurerequires
the concurrence of two requisites: an ordinary civil action for collection should be filed and subsequently a final
judgmentbecorrespondinglyrenderedtherein.
According to petitioner, the mere filing of a personal action to collect the principal loan does not suffice a final
judgmentmustbesecuredandobtainedinthepersonalactionsothatwaiveroftheremedyofforeclosuremaybe
appreciated. To put it differently, absent any of the two requisites, the mortgageecreditor is deemed not to have
waivedtheremedyofforeclosure.
Wedonotagree.
Certainly,thisCourtfindspetitioner'sargumentsuntenableandupholdsthejurisprudencelaiddowninBachrach 15
andsimilarcasesadjudicatedthereafter,thus:

Intheabsenceofexpressstatutoryprovisions,amortgagecreditormayinstituteagainstthemortgage
debtoreitherapersonalactionordebtorarealactiontoforeclosethemortgage.Inotherwords,he
mayhemaypursueeitherofthetworemedies,butnotboth.Bysuchelection,hiscauseofactioncan
bynomeansbeimpaired,foreachofthetworemediesiscompleteinitself.Thus,anelectiontobring
apersonalactionwillleaveopentohimallthepropertiesofthedebtorforattachmentandexecution,
evenincludingthemortgagedpropertyitself.And,ifhewaivessuchpersonalactionandpursueshis
remedyagainstthemortgagedproperty,anunsatisfiedjudgmentthereonwouldstillgivehimtheright
to sue for a deficiency judgment, in which case, all the properties of the defendant, other than the
mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his
remedyiscomplete,hiscauseofactionundiminished,andanyadvantagesattendanttothepursuitof
oneortheotherremedyarepurelyaccidentalandareallunderhisrightofelection.Ontheotherhand,
arulethatwouldauthorizetheplaintifftobringapersonalactionagainstthedebtorandsimultaneously
orsuccessivelyanotheractionagainstthemortgagedproperty,wouldresultnotonlyinmultiplicityof
suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and equity
(Osorio vs. San Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of being
suedintheplaceofhisresidenceoroftheresidenceoftheplaintiff,andthenagainintheplacewhere

thepropertylies.
InDanaovs.CourtofAppeals,16thisCourt,reiteratingjurisprudenceenunciatedinManilaTradingandSupplyCovs.Co
Kim17andMovidovs.
RFC,18invariablyheld:

...Theruleisnowsettledthatamortgagecreditormayelecttowaivehissecurityandbring,instead,
anordinaryactiontorecovertheindebtednesswiththerighttoexecuteajudgmentthereononallthe
propertiesofthedebtor,includingthesubjectmatterofthemortgage...,subjecttothequalification
that if he fails in the remedy by him elected, he cannot pursue further the remedy he has waived.
(EmphasisOurs)
Anentrealpropertiesinparticular,theCourthaslaiddowntherulethatamortgagecreditormayinstituteagainstthe
mortgagedebtoreitherapersonalactionfordebtorarealactiontoforeclosethemortgage.19
In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative.
Notably,anelectionofoneremedyoperatesasawaiveroftheother.Forthispurpose,aremedyisdeemedchosen
uponthefilingofthesuitforcollectionoruponthefilingofthecomplaintinanactionforforeclosureofmortgage,
pursuanttotheprovisionofRule68oftheofthe1997RulesofCivilProcedure.Astoextrajudicialforeclosure,such
remedyisdeemedelectedbythemortgagecreditoruponfilingofthepetitionnotwithanycourtofjusticebutwith
theOfficeoftheSheriffoftheprovincewherethesaleistobemade,inaccordancewiththeprovisionsofActNo.
3135,asamendedbyActNo.4118.
Inthecaseatbench,privaterespondentARCconstitutedrealestatemortgagesoveritspropertiesassecurityfor
the debt of the principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party
mortgagor. Under the law, third persons who are not parties to a loan may secure the latter by pledging or
mortgagingtheirownproperty.20
Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third person who
secures the fulfillment of another's obligation by mortgaging his own property, to be solidarily bound with the
principalobligor.Thesignatorytotheprincipalcontractloanremainstobeprimarilybound.Itisonlyupondefault
ofthelatterthatthecreditormayhaverecourseonthemortgagorsbyforeclosingthemortgagedpropertiesinlieuof
anactionfortherecoveryoftheamountoftheloan.21
Intheinstantcase,petitioner'scontentionthattherequisitesoffilingtheactionforcollectionandrenditionoffinal
judgmentthereinshouldconcur,isuntenable.
Thus,inCernavs.CourtofAppeals,22weagreedwiththepetitionerinsaidcase,thatthefilingofacollectionsuitbarred
theforeclosureofthemortgage:

Amortgageewhofilesasuitforcollectionabandonstheremedyofforeclosureofthechattelmortgage
constitutedoverthepersonalpropertyassecurityforthedebtorvalueofthepromissorynotewhenhe
seekstorecoverinthesaidcollectionsuit.
. . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning the
chattelmortgageasbasisforrelief,heclearlymanifestshislackofdesireandinteresttogoafterthe
mortgagedpropertyassecurityforthepromissorynote....
Contrarytopetitioner'sarguments,wethereforereiteratetherule,forclarityandemphasis,thatthemereactoffiling
of an ordinary action for collection operates as a waiver of the mortgagecreditor's remedy to foreclose the
mortgage.Bythemerefilingoftheordinaryactionforcollectionagainsttheprincipaldebtors,thepetitionerinthe
presentcaseisdeemedtohaveelectedaremedy,asaresultofwhichawaiveroftheothernecessarilymustarise.
Corollarily,nofinaljudgmentinthecollectionsuitisrequiredfortheruleonwaivertoapply.
Hence,inCaltexPhilippines,Inc.vs.IntermediateAppellateCourt, 23acaserelieduponbypetitioner,supposedlyto
buttressitscontention,thisCourthadoccasiontorulethatthemereactoffilingacollectionsuitfortherecoveryofadebt
securedbyamortgageconstituteswaiveroftheotherremedyofforeclosure.

Inthecaseatbar,petitionerBANTSAonlyhasonecauseofactionwhichisnonpaymentofthedebt.Nevertheless,
alternative remedies are available for its enjoyment and exercise. Petitioner then may opt to exercise only one of
tworemediessoasnottoviolatetheruleagainstsplittingacauseofaction.
AselucidatedbythisCourtinthelandmarkcaseofBachrachMotorCo.,Inc,vs.Icarangal.24
Fornonpaymentofanotesecuredbymortgage,thecreditorhasasinglecauseofactionagainstthe
debtor.Thissinglecauseofactionconsistsintherecoveryofthecreditwithexecutionofthesecurity.

In other words, the creditor in his action may make two demands, the payment of the debt and the
foreclosure of his mortgage. But both demands arise from the same cause, the nonpayment of the
debt,andforthatreason,theyconstituteasinglecauseofaction.Thoughthedebtandthemortgage
constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the
same obligation. Consequently, there exists only one cause of action for a single breach of that
obligation.Plaintiff,then,byapplyingtherulesabovestated,cannotsplituphissinglecauseofaction
by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the
mortgage.Ifhedoesso,thefilingofthefirstcomplaintwillbarthesubsequentcomplaint.Byallowing
the creditor to file two separate complaints simultaneously or successively, one to recover his credit
andanothertoforeclosehismortgage,wewill,ineffect,beauthorizinghimpluralredressforasingle
breach of contract at so much cost to the courts and with so much vexation and oppression to the
debtor.
PetitionerfurtherfaultstheCourtofAppealsforallegedlydisregardingthedoctrineenunciatedinCaltexwhereinthis
HighCourtrelaxedtheapplicationofthegeneralrulestowit:
Inthepresentcase,however,weshallnotfollowthisruletotheletterbutdeclarethatitisthecollection
suitwhichwaswaivedand/orabandoned.Thisrulingismoreinharmonywiththeprinciplesunderlying
ourjudicialsystem.Itisofnomomentthatthecollectionsuitwasfiledahead,whatisdeterminativeis
the fact that the foreclosure proceedings ended even before the decision in the collection suit was
rendered....
Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex case was never
intendedtooverrulethewellentrencheddoctrineenunciatedBachrach,whichtoourmindstillfindsapplicabilityin
casesofthissort.Toreiterate,Bachrachisstillgoodlaw.
Wethenquotethedecision25ofthetrialcourt,inthepresentcase,thus:
The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar
circumstancesobtainingtherein.Inthesaidcase,theSupremeCourtchastisedCaltexformaking"...
amockeryofourjudicialsystemwhenitinitiallyfiledacollectionsuitthen,duringthependencythereof,
foreclosedextrajudiciallythemortgagedpropertywhichsecuredtheindebtedness,andstillpursuedthe
collectionsuittotheend."Thus,topreventamockeryofourjudicialsystem",thecollectionsuithadto
benullifiedbecausetheforeclosureproceedingshavealreadybeenpursuedtotheirendandcanno
longerbeundone.
xxxxxxxxx
Inthecaseatbar,ithasnotbeenshownwhetherthedefendantpursuedtotheendorarestillpursuing
the collection suits filed in foreign courts. There is no occasion, therefore, for this court to apply the
exceptionlaiddownbytheSupremeCourtinCaltexbynullifyingthecollectionsuits.Quiteobviously,
too,theaforesaidcollectionsuitsarebeyondthereachofthisCourt.Thustheonlywaythecourtmay
preventthespectorofacreditorhaving"pluralredressforasinglebreachofcontract"isbyholding,as
theCourtherebyholds,thatthedefendanthaswaivedtherighttoforeclosethemortgagesconstituted
by the plaintiff on its properties originally covered by Transfer Certificates of Title Nos. T78759, T
78762,T78760andT78761.(RTCDecisionpp.,1011)
Inthislight,theactuationsofCaltexaredeservingofseverecriticism,tosaytheleast.26
Moreover,petitionerattemptstomisleadthisCourtbycitingthecaseofPCIBvs.IAC.27Again,petitionertriedtofita
squarepeginaroundhole.ItmustbestressedthatfarfromoverturningthedoctrinelaiddowninBachrach,thisCourtin
PCIBbuttresseditsfirmstandonthisissuebydeclaring:

Whilethelawallowsamortgagecreditortoeitherinstituteapersonalactionforthedebtorarealaction
toforeclosurethemortgage,hecannotpursuebothremediessimultaneouslyorsuccessivelyaswas
donebyPCIBinthiscase.
xxxxxxxxx
Thus,whenthePCIBfiledCivilCaseNo.29392toenforcepaymentofthe1.3millionpromissorynote
secured by real estate mortgages and subsequently filed a petition for extrajudicial foreclosure, it
violatestheruleagainstsplittingacauseofaction.
Accordingly,applyingtheforegoingrules,weholdthatpetitioner,bytheexpediencyoffilingfourcivilsuitsbefore
foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the
propertiesofthirdpartymortgagorandhereinprivaterespondentARC.Moreover,byfilingthefourcivilactionsand
byeventuallyforeclosingextrajudiciallythemortgages,petitionerineffecttransgressedtherulesagainstsplittinga

causeofactionwellenshrinedinjurisprudenceandourstatutebooks.
In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection suit was filed,
considering that the creditor should not be afforded "plural redress for a single breach of contract." For cause of
actionshouldnotbeconfusedwiththeremedycreatedforitsenforcement.28
Notably,itisnotthenatureoftheredresswhichiscrucialbuttheefficacyoftheremedychoseninaddressingthe
creditor's cause. Hence, a suit brought before a foreign court having competence and jurisdiction to entertain the
actionisdeemed,forthispurpose,tobewithinthecontemplationoftheremedyavailabletothemortgageecreditor.
This pronouncement would best serve the interest of justice and fair play and further discourage the noxious
practiceofsplittingupalonecauseofaction.
Incidentally,BANTSAallegesthatunderEnglishLaw,whichaccordingtopetitioneristhegoverninglawwithregard
totheprincipalagreements,themortgageedoesnotloseitssecurityinterestbysimplyfilingcivilactionsforsumsof
money.29
Weruleinthenegative.
This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case at bench,
Philippine law shall apply notwithstanding the evidence presented by petitioner to prove the English law on the
matter.
Inalonglineofdecisions,thisCourtadoptedthewellimbeddedprincipleinourjurisdictionthatthereisnojudicial
notice of any foreign law. A foreign law must be properly pleaded and proved as a fact. 30 Thus, if the foreign law
involvedisnotproperlypleadedandproved,ourcourtswillpresumethattheforeignlawisthesameasourlocalordomestic
orinternal
law.31Thisiswhatwerefertoasthedoctrineofprocessualpresumption.

Inthe instant case, assumingarguendo that the English Law on the matter were properly pleaded and proved in
accordancewithSection24,Rule132oftheRulesofCourtandthejurisprudencelaiddowninYaoKee,etal.vs.
SyGonzales,32saidforeignlawwouldstillnotfindapplicability.
Thus,whentheforeignlaw,judgmentorcontractiscontrarytoasoundandestablishedpublicpolicyoftheforum,
thesaidforeignlaw,judgmentorordershallnotbeapplied.33
Additionally,prohibitivelawsconcerningpersons,theiractsorproperty,andthosewhichhavefortheirobjectpublic
order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by
determinationsorconventionsagreeduponinaforeigncountry.34
Thepublicpolicysoughttobeprotectedintheinstantcaseistheprincipleimbeddedinourjurisdictionproscribing
thesplittingupofasinglecauseofaction.
Section4,Rule2ofthe1997RulesofCivilProcedureispertinent
If two or more suits are instituted on the basis of the same cause of action, the filing of one or a
judgmentuponthemeritsinanyoneisavailableasagroundforthedismissaloftheothers.
Moreover,foreignlawshouldnotbeappliedwhenitsapplicationwouldworkundeniableinjusticetothecitizensor
residentsoftheforum.Togivejusticeisthemostimportantfunctionoflawhence,alaw,orjudgmentorcontract
thatisobviouslyunjustnegatesthefundamentalprinciplesofConflictofLaws.35
Clearlythen,EnglishLawisnotapplicable.
As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual or
compensatory damages inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing the real estate
mortgagesconstitutedaclearviolationoftherightsofhereinprivaterespondentARC,asthirdpartymortgagor.
Actual or compensatory damages are those recoverable because of pecuniary loss in business, trade, property,
profession,joboroccupationandthesamemustbeproved,otherwiseiftheproofisflimsyandnonsubstantial,no
damageswillbegiven.36Indeed,thequestionofthevalueofpropertyisalwaysadifficultonetosettleasvaluationofreal
propertyisanimpreciseprocesssincerealestatehasnoinherentvaluereadilyascertainablebyanappraiserorbythecourt.
37Theopinionsofmenvarysomuchconcerningtherealvalueofpropertythatthebestthecourtscandoishearallofthe
witnesses which the respective parties desire to present, and then, by carefully weighing that testimony, arrive at a
conclusionwhichisjustandequitable.38

Intheinstantcase,petitionerassailstheCourtofAppealsforrelyingheavilyonthevaluationmadebyPhilippine

AppraisalCompany.Ineffect,BANTSAquestionstheactoftheappellatecourtingivingdueweighttotheappraisal
report composed of twenty three pages, signed by Mr. Lauro Marquez and submitted as evidence by private
respondent. The appraisal report, as the records would readily show, was corroborated by the testimony of Mr.
ReynaldoFlores,witnessforprivaterespondent.
Onthismatter,thetrialcourtobserved:
Therecordhereinrevealsthatplaintiffappelleeformallyofferedasevidencetheappraisalreportdated
March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty three (23) pages which set out in
detailthevaluationofthepropertytodetermineitsfairmarketvalue(TSN,April22,1994,p.4),inthe
amount of P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony of one Mr.
ReynaldoF.Flores,anappraiseranddirectorofPhilippineAppraisalCompany,Inc.(TSN,ibid.,p.3).
Thelatter'stestimonywassubjectedtoextensivecrossexaminationbycounselfordefendantappellant
(TSN,April22,1994,pp.622).39
In the matter of credibility of witnesses, the Court reiterates the familiar and wellentrenched rule that the factual
findingsofthetrialcourtshouldberespected.40Thetimetestedjurisprudenceisthatthefindingsandconclusionsofthe
trial court on the credibility of witnesses enjoy a badge of respect for the reason that trial courts have the advantage of
observingthedemeanorofwitnessesastheytestify.41

ThisCourtwillnotalterthefindingsofthetrialcourtonthecredibilityofwitnesses,principallybecausetheyareina
betterpositiontoassessthesamethantheappellatecourt. 42Besides,trialcourtsareinabetterpositiontoexamine
realevidenceaswellasobservethedemeanorofwitnesses.43

Similarly,theappreciationofevidenceandtheassessmentofthecredibilityofwitnessesrestprimarilywiththetrial
court.44Inthecaseatbar,weseenoreasonthatwouldjustifythisCourttodisturbthefactualfindingsofthetrialcourt,as
affirmedbytheCourtofAppeals,withregardtotheawardofactualdamages.

In arriving at the amount of actual damages, the trial court justified the award by presenting the following
ratiocinationinitsassaileddecision45,towit:
Indeed,theCourthasitsownmindinthematterofvaluation.Thesizeofthesubjectrealpropertiesare
(sic)setforthintheirindividualstitles,andtheCourtitselfhasseenthecharacterandnatureofsaid
properties during the ocular inspection it conducted. Based principally on the foregoing, the Court
makesthefollowingobservations:
1.Thepropertiesconsistofabout39hectaresinBo.Sto.Cristo,SanJosedelMonte,Bulacan,which
is(sic)notdistantfromMetroManilathebiggesturbancenterinthePhilippinesandareeasily
accessiblethroughwellpavedroads
2.Thepropertiesaresuitablefordevelopmentintoasubdivisionforlowcosthousing,asadmittedby
defendant'sownappraiser(TSN,May30,1994,p.31)
3. The pigpens which used to exist in the property have already been demolished. Houses of strong
materials are found in the vicinity of the property (Exhs. 2, 21 to 27), and the vicinity is a growing
community.IthasevenbeenshownthatthehouseoftheBarangayChairmanislocatedadjacentto
thepropertyinquestion(Exh.27),andtheonlyremainingpiggery(namedCherryFarm)inthevicinity
isabout2kilometersawayfromthewesternboundaryofthepropertyinquestion(TSN,November19,
p.3)
4.Itwillnotbehardtofindinterestedbuyersoftheproperty,asindubitablyshownbythefactthaton
March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the consolidated real estate
propertiestoStatelandInvestmentCorporation,inwhosefavornewtitleswereissued,i.e.,TCTNos.
T187781(m)T187782(m),T187783(m)T16653P(m)andT166521(m)bytheRegisterofDeedsof
Meycauayan(sic),Bulacan
5. The fact that ICCS was able to sell the subject properties to Stateland Investment Corporation for
Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple defendant's appraisal (Exh. 2)
clearlyshowsthattheCourtcannotrelyondefendant'saforesaidestimate(Decision,Records,p.603).
It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of witnesses command
great respect and consideration especially when the conclusions are supported by the evidence on record. 46
Applyingtheforegoingprinciple,wethereforeholdthatthetrialcourtcommittednopalpableerroringivingcredencetothe
testimony of Reynaldo Flores, who according to the records, is a licensed real estate broker, appraiser and director of
PhilippineAppraisalCompany,Inc.since1990. 47Astherecordsshow,Floreshadbeenwiththecompanyfor26yearsat
thetimeofhistestimony.

Ofequalimportanceisthefactthatthetrialcourtdidnotconfineitselftotheappraisalreportdated29March1993,
andthetestimonygivenbyMr.ReynaldoFlores,indeterminingthefairmarketvalueoftherealproperty.Aboveall
these, the record would likewise show that the trial judge in order to appraise himself of the characteristics and
condition of the property, conducted an ocular inspection where the opposing parties appeared and were duly
represented.
Based on these considerations and the evidence submitted, we affirm the ruling of the trial court as regards the
valuationoftheproperty
. . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39hectare properties (sic)
translatestojustaboutTwoHundredFiftyFourPesos(P254.00)persquaremeter.Thisappearstobe,
asthecourtsoholds,abetterapproximationofthefairmarketvalueofthesubjectproperties.Thisis
the amount which should be restituted by the defendant to the plaintiff by way of actual or
compensatorydamages....48
Further,petitionerascribeserrortothelowercourtawardinganamountallegedlynotaskednorprayedforinprivate
respondent'scomplaint.
Notwithstanding the fact that the award of actual and compensatory damages by the lower court exceeded that
prayedforinthecomplaint,thesameisnonethelessvalid,subjecttocertainqualifications.
Onthisissue,Rule10,Section5oftheRulesofCourtispertinent:
Sec.5.Amendmenttoconformtoorauthorizepresentationofevidence.Whenissuesnotraisedby
the pleadings are tried with the express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues may be made upon
motionofanypartyatanytime,evenafterjudgementbutfailuretoamenddoesnotaffecttheresultof
the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the
issuesmadebythepleadings,thecourtmayallowthepleadingstobeamendedandshalldosowith
liberality if the presentation of the merits of the action and the ends of substantial justice will be
subservedthereby.Thecourtmaygrantacontinuancetoenabletheamendmenttobemade.
ThejurisprudenceenunciatedinTalisaySilayMillingCo.,Inc.vs.AsociaciondeAgriculturesdeTalisaySilay,Inc.
49citingNorthernCementCorporationvs.IntermediateAppellateCourt50isenlightening:

TherehavebeeninstanceswheretheCourthasheldthatevenwithoutthenecessaryamendment,the
amountprovedatthetrialmaybevalidlyawarded,asinTuazonv.Bolanos(95Phil.106),wherewe
said that if the facts shown entitled plaintiff to relief other than that asked for, no amendment to the
complaintwasnecessary,especiallywheredefendanthadhimselfraisedthepointonwhichrecovery
was based. The appellate court could treat the pleading as amended to conform to the evidence
althoughthepleadingswereactuallynotamended.Amendmentisalsounnecessarywhenonlyclerical
errorornonsubstantialmattersareinvolved,asweheldinBankofthePhilippineIslandsvs.Laguna
(48Phil.5).InCoTiamcovs.Diaz(75Phil.672),westressedthattheruleonamendmentneednotbe
applied rigidly, particularly where no surprise or prejudice is caused the objecting party. And in the
recentcaseofNationalPowerCorporationvs.CourtofAppeals(113SCRA556),weheldthatwhere
thereisavarianceinthedefendant'spleadingsandtheevidenceadducedbyitatthetrial,theCourt
maytreatthepleadingasamendedtoconformwiththeevidence.
ItistheviewoftheCourtthatpursuanttotheabovementionedruleandinlightofthedecisionscited,
the trial court should not be precluded from awarding an amount higher than that claimed in the
pleadingnotwithstandingtheabsenceoftherequiredamendment.Butitisupontheconditionthatthe
evidenceofsuchhigheramounthasbeenpresentedproperly,withfullopportunityonthepartofthe
opposingpartiestosupporttheirrespectivecontentionsandtorefuteeachother'sevidence.
The failure of a party to amend a pleading to conform to the evidence adduced during trial does not
precludeanadjudicationbythecourtonthebasisofsuchevidencewhichmayembodynewissuesnot
raisedinthepleadings,orserveasabasisforahigherawardofdamages.Althoughthepleadingmay
nothavebeenamendedtoconformtotheevidencesubmittedduringtrial,judgmentmaynonetheless
berendered,notsimplyonthebasisoftheissuesallegedbutalsothebasisofissuesdiscussedand
theassertionsoffactprovedinthecourseoftrial.Thecourtmaytreatthepleadingasifithadbeen
amended to conform to the evidence, although it had not been actually so amended. Former Chief
JusticeMoranputthematterinthisway:
When evidence is presented by one party, with the expressed or implied consent of the
adverseparty,astoissuesnotallegedinthepleadings,judgmentmayberenderedvalidly
as regards those issues, which shall be considered as if they have been raised in the

pleadings. There is implied consent to the evidence thus presented when the adverse
partyfailstoobjectthereto.
Clearly,acourtmayruleandrenderjudgmentonthebasisoftheevidencebeforeiteventhoughthe
relevant pleading had not been previously amended, so long as no surprise or prejudice is thereby
causedtotheadverseparty.Putalittledifferently,solongasthebasisrequirementsoffairplayhad
beenmet,aswherelitigantsweregivenfullopportunitytosupporttheirrespectivecontentionsandto
objecttoorrefuteeachother'sevidence,thecourtmayvalidlytreatthepleadingsasiftheyhadbeen
amendedtoconformtotheevidenceandproceedtoadjudicateonthebasisofalltheevidencebefore
it.
In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and object to the evidence,
both documentary and testimonial, formally offered by private respondent, the rudiments of fair play are deemed
satisfied. In fact, the testimony of Reynaldo Flores was put under scrutiny during the course of the cross
examination. Under these circumstances, the court acted within the bounds of its jurisdiction and committed no
reversible error in awarding actual damages the amount of which is higher than that prayed for. Verily, the lower
court'sactuationsaresanctionedbytheRulesandsupportedbyjurisprudence.
Similarly, we affirm the grant of exemplary damages although the amount of Five Million Pesos (P5,000,000.00)
awarded, being excessive, is subject to reduction. Exemplary or corrective damages are imposed, by way of
exampleorcorrectionforthepublicgood,inadditiontothemoral,temperate,liquidatedorcompensatorydamages.
51 Considering its purpose, it must be fair and reasonable in every case and should not be awarded to unjustly enrich a

prevailing party. 52 In our view, an award of P50,000.00 as exemplary damages in the present case qualifies the test of
reasonableness.

WHEREFORE,premisesconsidered,theinstantpetitionisDENIEDforlackofmerit.ThedecisionoftheCourtof
Appeals is hereby AFFIRMED with MODIFICATION of the amount awarded as exemplary damages. According,
petitioner is hereby ordered to pay private respondent the sum of P99,000,000.00 as actual or compensatory
damagesP50,000.00asexemplarydamageandthecostsofsuit.
SOORDERED.
Bellosillo,Mendoza,QuisumbingandDeLeon,Jr.,JJ.,concur.
Footnotes

1CADecisioninCAG.R.CVNo.51094,pennedbyJusticeRicardoP.GalvezandconcurredinbyJustice
FidelV.PurisimaandJusticeB.A.AdefuinDelaCruzRollo,pp.3858.
2CAResolutioninCAG.R.CVNo.51094,dated22May1998Rollo,p.60.
3Rollo,p.38.
4Ibid.,p.39.
5Ibid.
6Ibid.,p.40.
7Ibid.
8Ibid.
9Ibid.
10Rollo,p.41.
11Ibid.
12Ibid.
13Rollo,pp.4142.
14Rollo,pp.1036.
15BachrachMotorCo.,Inc.,vs.EstebanIcarangal,68Phil.287.
16154SCRA446.

1771Phil.448.
18105Phil.886.
19Danaovs.CourtofAppeals154SCRA446.
20Article2085,CivilCodeLustanvs.CourtofAppeals,266SCRA663.
21Cernavs.CourtofAppeals220SCRA517.
22Ibid.
23176SCRA741.
2468Phil.287.
25Rollo,p.94.
26CaltexPhilippines,Inc.vs.IntermediateAppellateCourt,176SCRA741.
27196SCRA29.
28BachrachMotorvs.Icarangal,68Phil.287.
29Rollo,p.16.7.
30Adongvs.CheongSengGee,43Phil.43SyJocLiengvs.Syquia,16Phil.137.
31Limvs.Collector,36Phil.472.
32167SCRA736.
33PhilippineConflictofLaws,EighthEdition,1996,Paras,page46.
34Article17,par.3,CivilCode.
35PhilippineConflictofLaws,EightEdition,1996,Paras,p.60.
36Perfectovs.Gonzales,128SCRA640,ascitedinDanaovs.CourtofAppeals,154SCRA447.
3722Am.Jur.2d193.
38CityofManilavs.Corrales,32Phil.85,96.
39Rollo,p.103.
40Peoplevs.Morales,241SCRA267.
41Peoplevs.Gamiao,240SCRA254.
42Peoplevs.Cascalla,240SCRA482.
43LeeEngHongvs.CourtofAppeals,241SCRA392.
44Ibid.
45Rollo,pp.4647.
46Peoplevs.Asoy,251SCRA682.
47TSN,April22,1994,p.6.
48Decision,Records,ibid.
49247SCRA361,377378.
50158SCRA408.
51Article2229,CivilCode.

52PhiltrancoServiceExporters,Inc.vs.CourtofAppeals,273SCRA562.
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